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Chapter 14 Pricing Strategies and Tactics Copyright © 2001 by McGraw-Hill Ryerson Limited Sommers Barnes Ninth Canadian Edition Presentation by Karen A. Blotnicky Karen A. Blotnicky Mount Saint Vincent University, Halifax, NS
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 2 Chapter Goals To gain an understanding of: Price competition and value pricing Pricing strategies for market entry: skimming and penetration pricing Price discounts and allowances Geographic pricing strategies Special strategies including one-price, flexible-price, price lining, resale price maintenance, leader pricing, everyday low price, odd pricing Legal issues associated with pricing
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 3 Pricing Strategy how does a company decide what price to charge for its products and services? what is the price anyway? doesnt price vary across situations and over time? some firms have to decide what to charge different customers and in different situations they must decide whether discounts are to be offered, to whom, when, and for what reason
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 4 Price vs. Nonprice Competition price competition,In price competition, a seller regularly offers products priced as low as possible and accompanied by a minimum of services. nonprice competitionIn nonprice competition, a seller has stable prices and stresses other aspects of marketing. value pricingWith value pricing, firms strive for more benefits at lower costs to consumer. relationship pricing,With relationship pricing, customers have incentives to be loyal-- get price incentive if you do more business with one firm.
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 5 Nonprice Competition some firms feel price is the main competitive tool, that customers always want low prices other firms are looking for ways to add value, thereby being able to avoid low prices sometimes prices have to be changed in response to competitive actions nonprice competitionmany firms would prefer to engage in nonprice competition by building brand equity and relationships with customers
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 6 Relationship Pricing Uses price as a method to build long-term relationships with the best customers Focuses on giving better deals to better customers Goal is to price relative to the value of the customer to the firm, while building loyalty and stimulating repeat buying
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 7 The Price Determination Process In pricing, an organization first must decide on its pricing goal. The next step is to set the base price for a product. The final step involves designing pricing strategies that are compatible with the rest of the marketing mix. Many strategic questions must be answered: Will our company compete on the basis of price or other factors? What kind of discount schedule (if any) should be adopted?
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 8 SELECT PRICING OBJECTIVE SELECT METHOD OF DETERMINING THE BASE PRICE: Cost-plus pricing Price based on both demand and costs Price set in relation to market alone DESIGN APPROPRIATE STRATEGIES: Price vs. nonprice competition Skimming vs. penetration Discounts and allowances Freight payments One price vs. flexible price Psychological pricing Leader pricing Everyday low vs. high-low pricing Resale price maintenance The Process: An Illustration
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 9 Market Entry Pricing Strategies Market-Skimming PricingMarket-Skimming Pricing: Setting a high initial price for a new product. Works if product is new, distinctive and desired Early in Product Life Cycle, when demand inelastic Protected by entry barriers, e.g. patents Market-Penetration PricingMarket-Penetration Pricing : Setting a low initial price for a new product. Works if large market, elastic demand Economies of scale are possible Fierce competition
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 10 Discounts and Allowances Quantity discount: Quantity discount: The more you buy, the cheaper it becomes-- cumulative and non-cumulative. Trade discounts : Trade discounts : Reductions from list for functions performed-- storage, promotion. Cash discount : Cash discount : A deduction granted to buyers for paying their bills within a specified period of time, (after first deducting trade and quantity discounts from the base price)
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 11 3/10, NET 30 1/7, NET 30 Percentage to be deducted if bill is paid within specified time Percentage to be deducted if bill is paid within specified time Number of days from date of invoice in which bill must be paid to receive cash discount Number of days from date of invoice in which bill must be paid to receive cash discount Number of days from date of invoice after which bill is overdue Number of days from date of invoice after which bill is overdue Calculating a Cash Discount
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 12 Other Discounts and Allowances Seasonal Discounts Forward Dating Promotional Allowances
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 13 The Competition Act Predatory pricing: Predatory pricing: Selling at unreasonably low prices to lessen competition. Price discrimination: Price discrimination: The use of different prices for different customers. It is illegal if a price advantage is granted to one, but not another, where both compete and the articles are similar. Granting promotional allowances must be done on a proportionate basis to all customers.
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 14 Geographic Pricing Strategies F.O.B. Point-of-Production pricing:F.O.B. Point-of-Production pricing: Price quoted at factory-- buyer pays transportation. Uniform delivered pricing:Uniform delivered pricing: Same delivered price quoted to all; works if transportation costs small. Zone-delivered pricing:Zone-delivered pricing: Set same price within several zones, e.g. Maritimes, Quebec. Freight-absorption pricing: Freight-absorption pricing: Seller absorbs transport cost to penetrate market.
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 15 Special Pricing Strategies one-price strategyfirms may adopt a one-price strategy or charge different prices to different customers flexible pricing strategies:flexible pricing strategies: shoppers may pay different prices if they buy the same quantity
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 16 Psychology of Pricing psychologythe psychology of pricing suggests that price will convey a message about the product or service being sold leader pricing bait pricing prestige pricing price liningprice lining involves setting prices at a small number of fixed levels within a retail store odd pricingodd pricing is often used to suggest a bargain, while even pricing is used more in prestige, fashion stores
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 17 Questionable Pricing Practices resale price maintenanceresale price maintenance involves a supplier requiring that intermediaries sell a product at a certain price: illegal in Canada, firms are allowed to specify a suggested retail price loss-leadersome firms reduce prices, possibly even below cost, to attract customers; this form of loss-leader pricing is not illegal unless it persists for a long time with the goal of eliminating competition (predatory pricing)
Copyright © 2001 McGraw-Hill Ryerson Limited 14 - 18 EDLP pricing In EDLP pricing, a retailer charges a constant, low price with no temporary discounts. For example: Wal-Mart, Price Club, and Saturn. high-low pricing In high-low pricing, a retailer charges higher prices but then runs frequent promotions in which prices are temporarily lowered. Everyday Low Price (EDLP) vs. High/Low Pricing
Chapter 15 Price and Value Chapter 15 Price and Value Principles of Marketing 1201.
Copyright © 2001 McGraw-Hill Ryerson Limited Lecture 4 Pricing policies of pharmaceutical companies.
Foundations of Chapter M A R K E T I N G Copyright © 2003 by Nelson, a division of Thomson Canada Limited. Managing the Pricing Function 14.
Chapter 9: Pricing Objectives and Policies. Pricing Chapter objective Chapter objective What is price? What is price? Strategic dimensions Strategic.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: A Practical Approach 5/e by Peter Rix Slides prepared by: Joe Rosagrata 10–1 Chapter 10.
Pricing Marketing & Sales – 3 rd Hour. What is price? Price is the value of money placed on a good or service. The oldest form of pricing is the barter.
Chapter 11- slide 1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter Eleven Pricing Strategies.
Chapter 26 Pricing Strategies 1 Marketing Essentials Chapter 26 Pricing Strategies Section 26.2 Setting Prices.
Copyright © 2005 Pearson Education Inc. Pricing Chapter 12 PowerPoint slides Express version Instructor name Course name School name Date Principles of.
Copyright © 2007 Pearson Education Canada 11-1 Psychological Pricing Appeals to tendencies in consumer behaviour. Prestige Pricing Odd-Even Pricing.
© 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Marketing Management Dawn Iacobucci © 2010 South-Western, a part of Cengage Learning.
Marketing: Real People, Real Decisions Pricing Methods Chapter 13 Lecture Slides Solomon, Stuart, Carson, & Smith Your name here Course title/number Date.
Chapter foundations of Chapter M A R K E T I N G Managing the Pricing Function 14.
Pricing Strategies Chapter Ch 26.1 – Strategies in the Pricing Process The various pricing techniques The steps in setting prices The use of technology.
Pricing Products: Pricing Strategies 11 Principles of Marketing.
Unit 8 Pricing. Pricing Why don’t businesses charge customers the price they pay for the goods they sell?
Chapter Objectives Pricing Strategies CHAPTER Compare the alternative pricing strategies and explain when each strategy is most appropriate.
Pricing In Retailing Chapter 17 Dr. Pointers Notes.
Copyright 2004 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing 4/e by Quester, McGuiggan, Perreault and McCarthy 12–1 Part 3: The marketing mix Chapter.
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 19 Pricing Strategies.
1 Lamb, Hair, McDaniel CHAPTER 20 Setting the Right Price.
Copyright © 2006 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Part 7: Pricing Decisions 18.Price Concepts and Approaches.
Chapter 13 Pricing concepts. Learning objectives 1Discuss the importance of pricing decisions to the economy and to the individual organisation 2List.
PowerPoint Slides to accompany Rix Marketing: A Practical Approach 7e.
Chapter 10- slide 1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter Ten & Eleven Pricing: Understanding and Capturing Customer.
Chapter 10 - slide 1 Copyright © 2009 Pearson Education, Inc. Publishing as Prentice Hall Chapter Ten Pricing: Understanding and Capturing Customer Value.
Chapter 17 Pricing Objectives and Policies. Pricing Strategy Determines 1] How flexible prices will be 2] At what level prices will be set over the Product.
Pricing Strategies Chapter Definitions Market-Skimming Pricing Setting a high price for a new product to skim maximum revenues layer by layer.
Copyright 2000 Prentice Hall13-1 Chapter 13 Pricing Methods.
1 Pricing Concepts & Setting the Right Price. 2 The Importance of Price to Marketing Managers Revenue Profit The price charged to customers multiplied.
MR2100 (c) Paul Tilley Pricing: Building a Price Foundation Chapter 13 Marketing 2 MR2100.
12-1 Copyright 2007 McGraw-Hill Australia Pty Ltd PPTs t/a Marketing: Creating and Delivering Value 5e, by Quester, McGuiggan, Perreault McCarthy By.
Chapter pricing concepts for establishing value thirteen Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
Chapter 26 Pricing Strategies. Pricing Concepts 26.1 After finishing this section, you will know: –The three basic pricing concepts involving cost, demand,
Pricing Products: Understanding and Capturing Customer Value A Global Perspective 10 Philip Kotler Gary Armstrong Swee Hoon Ang Siew Meng Leong Chin Tiong.
Chapter 17/18 Pricing / Pricing Strategies Describe typical company pricing objectives Discuss Market Share vs. Sales Review Break-Even Analysis Skimming.
Chapter Eleven Pricing Strategies Copyright ©2014 by Pearson Education, Inc. All rights reserved.
CHAPTER 19 - Pricing Strategies. PRICING STRATEGIES 1. SKIMMING –involves use of relatively high price compared to competitor prices ie. New drug. 2.
For use only with Perreault and McCarthy texts. © The McGraw-Hill Companies, Inc., 1999 Irwin/McGraw-Hill Chapter 17: Pricing Objectives and Policies.
1 Copyright © 2009 by Nelson Education, Ltd. All rights reserved. Chapter 17 Setting the 17 Right Price Canadian Adaptation prepared by Don Hill, Langara.
Pricing Strategies LECTURE-17. New-Product Pricing Strategies Product Mix Pricing Strategies Price Adjustment Strategies Price Changes Public Policy and.
Pricing Strategies After deciding whether to use a cost-oriented, demand-oriented, or a competition-oriented policy, your company will develop a pricing.
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Objective 5.02 The Price Strategy. Factors Affecting Price Costs and Expenses ◦ fixed - Business costs that are not affected by changes in sales volume.
Price Strategy & Management Chapter 10 & 11. Price “The exchange value of a good or service in the marketplace.” Value derived from tangible and intangible.
Chapter 26 Pricing Strategies1 Marketing Essentials Pricing Concepts.
Copyright © 2004 by South-Western, a division of Thomson Learning, Inc. All rights reserved. Chapter 14 Managing the Pricing Function.
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